In 2002 it lost its accreditation and federal funding due to a financial mismanagement scandal during the 1998–2002 tenure of Dolores Cross as school president. The United Negro College Fund also terminated its support for the college.[3]

In August 2012, Morris Brown filed for Chapter 11 bankruptcy in an attempt to prevent foreclosure and sale of the school at auction.[4]

As of 2011[update] Morris Brown is in a "Self-Study" phase of the accreditation process with Transnational Association of Christian Colleges and Schools and is looking to reapply in October 2012. Until 2003, Morris Brown was accredited by a regional accreditor, the Southern Association of Colleges and Schools (SACS). Morris Brown was more than $23 million in debt and was on probation in 2001 with SACS for shoddy bookkeeping and a shortage of professors with advanced degrees. In December 2002, SACS revoked Morris Brown's accreditation. Almost eight years later, the college settled its nearly $10 million debt with the Department of Education.[5]

The Morris Brown Colored College (its original name) was founded by African Americans affiliated with the African Methodist Episcopal Church. This was the first independent black denomination in the United States, founded in Philadelphia, Pennsylvania by free blacks in the early 19th century. The AME Church sent missionaries to the South following the American Civil War. They founded numerous new AME churches in Georgia and other states, with hundreds of thousands of freedmen joining new congregations.

On January 5, 1881, the North Georgia Annual Conference of the AME Church passed a resolution to establish an educational institution in Atlanta for the moral, spiritual, and intellectual growth of Negro boys and girls. The school formally opened its doors on October 15, 1885, with 107 students and nine teachers. Morris Brown was the first educational institution in Georgia to be owned and operated independently by African Americans.[6] For more than a century, the college enrolled many students from poor backgrounds, large numbers of whom returned to their hometowns as teachers, as education was a mission of high priority.

Fountain Hall, originally known as Stone Hall when occupied by Atlanta University, was completed in 1882. It is closely associated with the history of the college and has been designated a National Historic Landmark. After Atlanta University consolidated its facilities, it leased the building to Morris Brown College, which renamed it Fountain Hall.[7]

Eighty percent of the school's 2,500 students received financial aid from the federal government, totaling $8 million annually in the early 2000s. A federal criminal case filed against the former president, Dolores Cross, and the financial aid director, Parvesh Singh, proved the pair had embezzled a great deal of the federal aid. They diverted it to ineligible college costs, such as personal staff, instead of subsidizing the students.

During the time Cross held the college presidency, from November 1998 through February 2002, Singh obtained about 1,800 payments from federally insured loans and Pell grants for these students, who had no idea they would be responsible for paying off the loans, the indictment said.[9] Singh pleaded guilty to one count of embezzlement. Singh, 64, also received five years of probation but 18 months of home confinement.[8]

At the time of the 2004 indictment, Cross was teaching at DePaul University in Chicago.[10] On May 1, 2006, Cross pleaded guilty to fraud by embezzlement.[11] She agreed to pay $11,000 to the Department of Education in restitution.

On January 3, 2007, Cross was sentenced to five years of probation and one year of home confinement for the fraud. Cross, 70 years old, suffers from sleep apnea and has had a series of small strokes, factors the judge took into consideration. An additional factor the judge considered for each person was that they did not use the embezzled funds for personal profit, but to prop up the school's poor finances.[8] The initial indictment said Cross had used the funds to finance personal trips for herself, her family, and friends.[12]

The prosecutor, U.S. Attorney David Nahmias, said at the sentencing: "When the defendants arrived at Morris Brown, the college was already in serious financial condition. Thereafter, these defendants misappropriated ... money in fairly complicated ways in what appears to have been a misguided and ultimately criminal attempt to keep Morris Brown afloat."[3]

The school has $22 million in long-term debt and $5 million in short term debt. Both the alumni association and the African Methodist Episcopal Church have pledged to keep the school from closing. As of January 2009, Morris Brown has 240 students.[13]

Morris Brown College, at one point reduced to an enrollment of just 44 students, continues to operate as a scaled-down version of its former self.[14] In 2004, Dr. Samuel D. Jolley, who had been the school's president from 1993 to 1997, agreed to return to the presidency to help the college's attempts to recover.

"Morris Brown", a song by Atlanta hip-hop duo OutKast off their 2006 release Idlewild, features a performance from the Morris Brown College Marching Wolverines.

The school hoped to have 107 students in the fall of 2006, the same number when the school opened in 1881, but failed to meet even this modest goal.[citation needed] Tuition in the fall semester of 2006 was $3,500, but without accreditation, students cannot obtain federal or state financial aid for their tuition and other school expenses.

By February 2007, MBC had only 54 students in two degree programs, supported by 7 faculty and staff employees.[15] Despite this, after the sentencing of two former administrators, the chair of the college's board of trustees, Bishop William Phillips DeVeaux, issued a press release stating the college would move forward and that "This sad chapter in the college's history is now closed."[3]

In addition to civil lawsuits filed by former and current students, Morris Brown faces a civil suit for defaulting on a $13 million property bond, a case that eventually could lead to foreclosure on some of the college's most historic buildings, including its administration building, attorneys involved in the case say. The complaint asks for $10.7 million in principal owed on the loan agreement, $1.5 million in interest and a per diem of $2,100 for each day Morris Brown does not pay.

In December 2008, the City of Atlanta disconnected water service to the college because of an overdue water bill.[16] The debt has since been paid and the service restored.

Radio personality Tom Joyner made several offers to buy the troubled college from 2002 through 2004, during the worst of the accreditation and fraud crises. In 2003, his charitable foundation gave the school $1 million to assist with its immediate needs.[10]

In June 2013, Morris Brown's Board of Trustee's rejected a $9.7 million offer from the city of Atlanta. However, negotiations continued and mid-year in 2014 Morris Brown reached an agreement with Invest Atlanta, Atlanta's economic development agency.[18] The offer is expected to eliminate the school's $35 million debt by purchasing the 37 acres on which the college sits, paying the school's creditors, and paying $480,000 in back pay owed to professors and staff. The college will be able to retain use of several historic buildings for educational purposes. The city's administration wishes to revitalize the area around Morris Brown; the site of the new Atlanta Falcons stadium is just east of the campus. Mayor Kasim Reed says that the city has no interest in operating the school, and that it would be illegal for them to do so.[19]